/biz/ - Business & Finance

>>988262
>did you specifically allocate those proportions according to some research or is that just what you were comfortable with?
The allocations reflect my risk tolerances, investing horizon, and tax needs. They aren't based on any particular research or study.

>if you believe small cap out-performance will persist, why do you have such a small allocation to small caps?
Fair question.

First, understand that in the US, small caps are only about 9-10% of the total market. So even at 15% I'm already modestly over-weighting.

Second, I've only become convinced of the merits of strategic over-weighting this year, and I'm still deciding if and how to fold this into my overall strategy. Small caps are more volatile, and therefore strategic over-weighting is more suited to investors with the longest time horizons (i.e., young investors in their 20's and 30's). By comparison, I'm older, wealthier, and more risk averse than the average 20-30 year old. So even though I believe in overweighting small caps, that doesn't by itself answer the question how to adapt that to my situation.

I suspect I'll build to about 20%, slowly (see below), because that seems right for me.

>How often do you re-balance?
I don't do traditional rebalancing because the tax hits would be too great. I have substantial unrealized capital gains in almost all my funds, and because I'm in the highest tax bracket for gains taxes, moving allocations around is too costly to justify under normal circumstances. Something as small as a 5% shift in my holdings means a $600,000 transaction and possibly as much as $40,000-$60,000 in taxes.

(Its for the same reason that I'm stuck with 40 funds and can't simplify my holdings as I'd like. It'd just be too costly).

Instead, I try to keep my allocations in line with new money from other sources or investments. Because I own so many different funds, its easy to buy whatever specific allocation sector needs to be boosted. I've made it work so far.